Grounded: Mexicana Airlines Halts Operations

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Debt-ridden Mexicana de Aviacion, Mexico's largest air carrier is halting all operations, according to Mexico's transportation secretary.

Juan Francisco Molinar Horcasitas told reporters the struggling airline will cease all flights and other activity as of midnight Friday.

The country's biggest airline was forced to shut down because it does not have enough money to keep flying, Francisco said.

But Mexicana da Aviacion "is in a process that should lead to restructuring,'' he said.

Mexicana filed for chapter 15 bankruptcy protection in Mexico and the United States on Aug. 2 while seeking to restructure its costs.

In court filings, Mexicana said it was badly hit by the swine flu outbreak last year that scared away travelers for months and by the global economic slowdown. The airline added that high jet fuel prices and labor costs contributed to its financial troubles.

Before the bankruptcy filing, the company unsuccessfully sought union agreement on pay cuts of 41 percent for pilots and 39 percent for flight attendants, along with a 40 percent reduction in employees, saying both were needed to keep the company afloat.

Labor leaders rejected the proposal, saying their members already agreed to cuts in 2006.

Executives said this month that the company needed an infusion of at least $100 million to keep flying, and on Aug. 21 a group of Mexican investors called Tenedora K announced it had bought a 95 percent stake in the holding company that controls Mexicana and the domestic airlines Mexicana Click and Mexicana Link.